UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-4028
TRANSMEDIA NETWORK INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 84-6028875
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11900 Biscayne Boulevard, Miami, Florida 33181
(Address of principal executive offices) (zip code)
305-892-3300
(Registrant's telephone number,
including area code)
Indicate by (X) whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's Common Stock, $.02 par
value, as of April 30, 1996: 10,119,333.
1 of 12
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I N D E X
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1 Financial Statements:
Consolidated Balance Sheets-- 3, 4
March 31, 1996 (unaudited)
and September 30, 1995 (audited)
Consolidated Statements of Operations-- 5
Three months and six months ended
March 31, 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows-- 6, 7
Six months ended March 31, 1996
and 1995 (unaudited)
Notes to Unaudited Consolidated 8, 9
Financial Statements
Item 2 Managements Discussion and Analysis 9, 10
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 10, 11
SIGNATURES 12
2 of 12
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Part I-Item 1
Financial Information
TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND SEPTEMBER 30, 1995
March 31, * September 30,
1996 1995
(unaudited)
----------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,870,966 $ 2,270,322
Accounts receivable, less
allowance for doubtful accounts:
March 31, 1996: $15,000
September 30, 1995: $15,000 2,967,242 1,714,421
Rights to receive 29,317,348 26,147,400
Prepaid expenses and other
current assets 1,074,996 708,253
Deferred income taxes 441,285 441,285
---------- ----------
Total current assets 35,671,837 31,281,681
---------- ----------
Securities available for sale,
at fair value 2,188,639 2,899,691
---------- ----------
Property and equipment 5,964,743 4,565,283
Less accumulated depreciation 1,626,983 1,093,583
---------- ----------
4,337,760 3,471,700
---------- ----------
Other assets 163,373 133,430
---------- ----------
Total assets $42,361,609 $37,786,502
========== ==========
(continued)
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND SEPTEMBER 30, 1995
(continued)
March 31, * September 30,
1996 1995
(unaudited)
----------- ---------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - Rights to receive $ 2,998,655 $ 4,933,070
Accounts payable - reimbursable
tax and tips 625,564 428,000
Accounts payable - other 1,866,329 1,663,754
Income taxes payable 243,126 --
Accrued expenses 969,208 1,028,561
---------- ----------
Total current liabilities 6,702,882 8,053,385
Line of credit 8,000,000 2,000,000
Deferred membership and renewal
fee income, net -- 1,178,234
Deferred income taxes 1,424,360 1,701,670
---------- ----------
Total liabilities 16,127,242 12,933,289
---------- ----------
Stockholders' equity:
Preferred stock - par value $.10 per share;
authorized 1,000,000 shares; none issued -- --
Common stock - par value $.02 per share;
authorized 20,000,000 shares; issued and
outstanding: 10,119,333 shares at
March 31, 1996 and 10,118,770 shares
at September 30, 1995 202,387 202,375
Additional paid-in capital 10,517,235 10,513,055
Unrealized gain on securities
available for sale 1,164,270 1,598,011
Retained earnings 14,350,475 12,539,772
---------- ----------
Total stockholders' equity 26,234,367 24,853,213
---------- ----------
Total liabilities and stockholders'
equity $42,361,609 $37,786,502
========== ==========
See notes to consolidated financial statements
* The balance sheet at September 30, 1994 is derived from the registrant's
audited financial statements.
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended, Six Months Ended
March 31, March 31,
1996 1995 1996 1995
----------- ----------- ---------- -------
<S> <C> <C> <C> <C>
Revenues:
Net sales $17,356,073 $14,880,775 $32,830,821 $28,194,678
Membership and renewal fee income 1,205,853 816,253 2,352,322 1,587,705
Continuing franchise fee and
royalty income 589,435 683,510 1,138,917 1,362,910
Commissions income 153,345 137,355 321,637 293,010
----------- ---------- ---------- ----------
19,304,706 16,517,893 36,643,697 31,438,303
Cost of sales 11,463,542 9,973,489 21,816,725 18,904,549
----------- ---------- ---------- ----------
Gross profit 7,841,164 6,544,404 14,826,972 12,533,754
Selling, general and administrative
expenses 5,943,368 4,610,191 11,411,815 8,805,570
----------- ---------- ---------- ----------
Operating income 1,897,796 1,934,213 3,415,157 3,728,184
----------- ---------- ---------- ----------
Other income (expense):
Interest and other income 35,602 66,654 78,562 125,209
Interest expense and financing costs (149,341) (23,000) (223,629) (24,875)
Initial franchise fee and license
income, net of expenses 30,100 -- 30,100 95,000
----------- ---------- ---------- ----------
(83,639) 43,654 (114,967) 195,334
----------- ---------- ---------- ----------
Income before income taxes 1,814,157 1,977,867 3,300,190 3,923,518
Income taxes 708,000 781,300 1,287,100 1,559,400
----------- ---------- ---------- -----------
Net income $ 1,106,157 $ 1,196,567 $ 2,013,090 $ 2,364,118
=========== ========== ========== ==========
Income per common and common equivalent share:
Primary $.11 $.12 $.20 $.24
===== ===== ===== =====
Fully diluted $.11 $.12 $.20 $.24
===== ===== ===== =====
Weighted average number of common and common equivalent shares outstanding:
Primary 10,297,206 10,047,283 10,317,636 10,029,198
========== ========== ========== ==========
Fully diluted 10,297,206 10,065,427 10,317,326 10,049,218
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements
5 of 12
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
------ ------
Cash flows from operating activities:
Net income $ 2,013,090 $ 2,364,118
----------- -----------
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 538,400 348,770
Changes in assets and liabilities:
Accounts receivable (1,252,821) 398,492
Rights to receive (3,169,948) (2,916,798)
Prepaid expenses (366,743) (578,021)
Other assets (34,943) 101,324
Accounts payable - rights to
receive (1,934,415) (391,781)
Accounts payable - reimbursable
tax and tips 197,564 (82,370)
Accounts payable - other 202,575 (495,974)
Income taxes payable 243,126 (396,598)
Accrued expenses (61,083) (57,614)
Deferred membership income (1,178,234) 78,054
---------- ----------
Total adjustments ( 6,816,522) ( 3,992,516)
---------- ----------
Net cash used for operating
activities ( 4,803,432) ( 1,628,398)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (1,399,460) (614,397)
---------- ----------
Net cash used in investing activities (1,399,460) (614,397)
---------- ----------
6 of 12 (Continued)
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(Continued)
1996 1995
------ ------
Cash flows from financing activities:
Borrowings on note payable to bank
under revolving line of credit $ 6,000,000 $ 1,000,000
Dividends paid (200,656) (190,594)
Conversion of warrants and options
for common stock, net of tax
benefits 4,192 617,728
---------- ----------
Net cash provided by financing
activities 5,803,536 1,427,134
---------- ----------
Net decrease in cash and cash
equivalents (399,356) (815,661)
Cash and cash equivalents at beginning
of period 2,270,322 2,478,899
---------- ----------
Cash and cash equivalents at
end of period $ 1,870,966 $ 1,663,238
========== ==========
Supplemental disclosure of cash flow
information:
Cash paid during the periods for:
Interest $ 163,646 $ 13,375
========== ==========
Income taxes $ 839,774 $ 1,832,147
========== ==========
See notes to consolidated financial statements
7 of 12
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TRANSMEDIA NETWORK INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The balance sheet as of September 30, 1995 was derived from the
registrant's audited consolidated financial statements.
The information presented in each of the included unaudited
consolidated financial statements, in the opinion of management, reflects all
adjustments necessary to a fair statement of the results for all interim
periods. The results for the three and six months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
The consolidated financial statements, as presented, are in summarized
form, and footnote disclosures normally included in financial statements
presented in accordance with generally accepted accounting principles, have been
condensed or omitted. Complete disclosures for the year ended September 30, 1995
are presented in the Company's 10K filing which includes audited consolidated
financial statements.
2. Line of Credit
In January 1996, the Company amended its revolving line-of-credit
agreement with NationsBank of Florida, N.A. The funds available to the Company
under the January 1996 agreement amount to $20,000,000. The agreement, which
terminates on January 26, 1999, bears interest at the floating prime rate, or a
"LIBOR plus" option, and is unsecured. At March 31, 1996, the outstanding
balance was $8,000,000.
3. Income per Common and Common Equivalent Share
Primary earnings per share were based on the weighted average number of
common and common equivalent shares outstanding during the periods presented.
Equivalent shares consist of those shares issuable upon the assumed exercise of
stock options and warrants calculated under the treasury stock method, based on
average stock market prices in the periods.
8 of 12
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Fully diluted earnings per share were computed using the weighted
average number of common and common equivalent shares outstanding in the
periods, assuming exercise of options and warrants calculated under the treasury
stock method, based on stock market prices at the end of the periods.
4. Deferred Membership and Renewal Fee Income, Net
Deferred membership and renewal
fee income, gross $ 3,106,771 $ 2,866,916
Unamortized advertising costs 3,134,025) (1,688,682)
--------- ----------
Deferred membership and renewal
fee income, net $ (27,254) $ 1,178,234
========== ==========
At March 31, 1996, the net balance of $27,254 is included in other
assets.
5. Reclassification
Certain prior year amounts have been reclassified to conform with the
current presentation.
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
a. Results of Operations - Comparison of Three Months and Six
Months ended March 31, 1996 and 1995.
Net Sales for the three and six months ended March 31, 1996 increased
by $2,475,298 (17% increase) and $4,636,143 (16% increase) compared
with the same periods in 1995. The sales increase was due to a greater
number of cardmembers supported by additional participating restaurants
and from sales recorded in a formerly franchised territory which was
repurchased in July 1995. Membership and renewal fee income increased
by $389,600 (48% increase) and $764,617 (48% increase) in the three and
six month periods ended March 31, 1996 compared with the prior year's
periods because of an increased number of new cardmembers as well as
renewals.
9 of 12
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Continuing franchise fee income decreased by $94,075 (14% decrease) and
$223,993 (16% decrease) in the three and six month period ended March
31, 1996, versus the prior year's comparable periods primarily because
one of the franchises from which continuing franchise fee income had
been received was acquired by the Company in July 1995. As a result of
the growth in the components of revenue, gross profit increased by
$1,296,760 to $7,841,164 for the three month period ended March 31,
1996 and by $2,293,218 to $14,826,972, for the six month period ended
March 31, 1996.
Selling, general and administrative expenses for the three and six
months ended March 31, 1996 increased by $1,333,177 and $2,606,245,
respectively, compared to the prior year's comparable periods and
represented increases of 29% and 30%, respectively. Expenses
contributing to the increase in the current period included costs
associated with operating new areas started up or reacquired since the
second quarter of last year. These areas include Chicago, Detroit,
Tampa, Milwaukee, Indianapolis, Phoenix and Denver. Costs directly
related to sales, such as commissions and processing costs, increased,
as did mailing and printing costs associated with the increased number
of cardmembers.
Income before income taxes amounted to $1,814,157 and $3,300,190 in the
three and six months ended March 31, 1996, compared with $1,977,867 and
3,923,518 in the 1995 comparable periods.
Net income for the three and six months ended March 31, 1996 was
$1,106,157 and $2,013,090, or $.11 and $.20 per share respectively,
compared with $1,196,567 and $2,364,118 or $.12 and $.24 per share
respectively, in the comparable periods of the prior year.
b. Liquidity and Capital Resources
The Company's working capital at March 31, 1996 was $28,968,955,
compared with $23,228,296 at September 30, 1995. The increase of
$5,740,659 was due primarily to the Company's profit during the period
and borrowings under the Company's line of credit which were used to
purchase Rights to Receive and acquire new cardmembers. Cash and cash
equivalents amounted to $1,870,966 at March 31, 1996. The Company has
available a $20,000,000 revolving line of credit, of which $8,000,000
was utilized at March 31, 1996. The Company believes that cash
generated from operations, cash on hand and cash available under its
line of credit will satisfy its cash requirements.
10 of 12
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PART II - OTHER INFORMATION
Items 1, 2, 3, and 5
Items 1, 2, 3, and 5 of Part II are either inapplicable or are answered
in the negative and are omitted pursuant to the instructions to Part II.
Item 4
Submission of matter to a vote of security holders
(a) Annual meeting of stockholders was held on March 20,
1996.
(b) Irwin Hochberg, Henry Seiden and Jack Africk were elected to
three-year terms on the Company's Board of Directors. Barry S.
Kaplan was elected to a one-year term on the Company's Board
of Directors. Melvin Chasen and James M. Callaghan continued
as Board members with terms expiring in 1998. Herbert M.
Gardner and A. Barry Merkin continued as Board members with
terms expiring in 1997.
(c) A proposal to adopt the 1996 Long-Term Incentive Plan was
approved.
(d) No other matters were voted upon.
Item 6
Exhibits and reports on Form 8K
(a) Exhibits
None
(b) Reports on Form 8K
No reports on Form 8K were filed during the Quarter
Ending March 31, 1996.
11 of 12
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S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSMEDIA NETWORK INC.
(Registrant)
May 8, 1996 /s/David L. Weinberg
-----------------------
David L. Weinberg
Vice President and
Chief Financial Officer
12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000078536
<NAME> TRANSMEDIA NETWORK
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,870,966
<SECURITIES> 0
<RECEIVABLES> 2,982,242
<ALLOWANCES> 15,000
<INVENTORY> 29,317,348
<CURRENT-ASSETS> 35,671,837
<PP&E> 5,964,743
<DEPRECIATION> 1,626,983
<TOTAL-ASSETS> 42,361,609
<CURRENT-LIABILITIES> 6,702,882
<BONDS> 0
0
0
<COMMON> 202,387
<OTHER-SE> 26,031,980
<TOTAL-LIABILITY-AND-EQUITY> 42,361,609
<SALES> 32,830,821
<TOTAL-REVENUES> 36,643,697
<CGS> 21,816,725
<TOTAL-COSTS> 33,228,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 223,629
<INCOME-PRETAX> 3,300,190
<INCOME-TAX> 1,287,100
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,013,090
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
